On 31 Oct 2017, Royal Decree (No 647) was gazetted, providing a Thailand SME with a double (200%) corporate tax deduction allowance for expenditure paid out for purchasing or hiring computer software programs during their 2017 to 2019 financial years. 

This Tax Insight has been updated for Royal Decree (No 647).

The SME Tax Structure

The structure of a Small & Medium Enterprise (SME) is a Thailand corporate entity with:

• Paid up capital not exceeding 5 million Baht at the end of a financial year; and
• Gross sales of goods or services income not exceeding 30 million Baht for that financial year.

Irrespective of share capital in a corporate entity being held by foreigners, if the entity meets the above two conditions, it is entitled to the following tax benefits:

Corporate Income Tax

Instead of being subject to the normal (standard) rate of corporate income tax for entities in Thailand, an SME is subject to reduced rates of corporate income tax as prescribed under Royal Decrees from time to time. The current rates of corporate tax are as follows:

	For the 2015 & 2016 Financial Years (2)	For the 2017 & Later Financial Years (2)
On the following portions of net profit:
THB 0 - 300,000	Exempt (1)	Exempt (1)
THB 300,000 - 3,000,000	10%	15%
THB 3,000,000 -	10%	20%

(1) As prescribed in Royal Decree (No 564) issued on 29 April 2013.
(2) As prescribed in Royal Decree (No 603) issued on 18 April 2016.

Accelerated depreciation allowances

For SMEs that have fixed assets excluding land of not more than 200 million Baht and not more than 200 employees, the following accelerated rates of depreciation allowances are available:

Permanent buildings		25% up front and remainder at not more than 5% pa
Computer hardware and software		40% up front and remainder at not more than 33.33% pa
Plant and equipment assets		40% up front and remainder at not more than 20% pa

Double deduction allowances

For the following types of expenditures SMEs are entitled to claim a double income tax deduction allowance:

For the amount of expenditure paid out as accounting fees to students studying accounting at a vocational school or a university during the period 01 Jan 2016 to 31 Dec 2018		Double (200%) tax deduction (1)
For the amount of expenditure paid out for the purchase of electronic payment receivers (not including payments of rental fees to owners of receivers) during the period 01 Nov 2016 to 31 Dec 2018		Double (200%) tax deduction (2)
For the amount of expenditure paid out as service fee charges for using electronic payment receivers during the period 01 Nov 2016 to 31 Dec 2018		Double (200%) tax deduction (2)
For the amount of expenditure paid out for purchase or hire of computer software programs registered with the Digital Promotion Agency during the three financial years that begin on or after 01 Jan 2017 and before or on 31 Dec 2019		Double (200%) tax deduction but not exceeding 100,000 Baht (3)

(1) As prescribed in Royal Decree (No 607) issued on 11 May 2016.
(2) As prescribed in Royal Decree (No 640) issued on 07 May 2017.
(3) As prescribed in Royal Decree (No 647) issued on 28 October 2017.

Caution

Whilst it is the intention of the Government to provide SMEs with reduced rates of corporate tax, SMEs that are service providers should note that if the amount of tax payable under the reduced rates of corporate tax is not sufficient enough to cover the 3% withholding tax deductions from their services incomes, such SMEs can expect the Revenue Department's tax audit officers to seek to adjust net profit so that sufficient tax is payable to cover the withholding tax credits.

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